Festive cheer for car market: Sales zoom in October, but inventory still a concern

While the inventory level at dealerships was at an all-time high of 80-85 days in September, it decreased marginally to 75-80 days in October.

With Navaratri and Diwali falling in the same month, it was festive cheer for the Indian car market as retail sales sky-rocketed over 32% year-on-year (y-o-y) and more than 75% month-on-month (m-o-m) in October. However, high inventory level at dealerships continues to be a major concern.

According to data from the industry body Federation of Automobile Dealers Associations (FADA), the passenger vehicle (PV) retails grew 32.38% y-o-y at 483,159 units in October from 364,991 units in the same month last year. Over September, there was a jump of 75.26% m-o-m from 275,681 units.

"October witnessed the convergence of two major festivals, Navaratri and Diwali, both occurring in the same month. These festivities traditionally account for 30–35% of total annual auto sales, so the industry's focus was keenly on how October would unfold. With dealers entering this crucial period fully committed and carrying all-time high inventory levels, the month did not disappoint," said C S Vigneshwar, President, FADA.

"Dealers highlighted that aggressive offers, attractive schemes and new model introductions further stimulated demand. Enhanced vehicle availability and strong market interest, especially for SUVs and new products, also contributed to the exceptional sales," he added.

FADA noted that the rural market played a major role in driving growth with the government's announcement of an increase in the minimum support price (MSP) for Rabi crops further boosting market sentiments.

Source - FADA Research

While the dealership inventory level was at an all-time high of 80-85 days in September, it decreased marginally to 75-80 days in October. This was mainly due to carmakers 'heavily' stocking dealers and might lead to substantial discounts continuing till the end of 2024.

With an estimated 4,800,000 weddings scheduled to take place across the country in November and December, PV sales are expected to be robust amid handsome offers.

Vehicle purchases traditionally witness an uptick during the wedding season, Vigneshwar said, adding that FADA anticipates that this will translate into strong sales in the near term.

"For PVs, the marriage season and ongoing promotional offers are expected to sustain demand. Yet, there are apprehensions about potential slowdowns caused by customers postponing purchases in anticipation of better year-end discounts. FADA also urges, PV original equipment manufacturers (OEMs) to further rationalise supply," he said.